Taming the dragon

After many trials and tribulations, India Software Inc’s slow and steady approach is gaining recognition, and customers in China, says Venkatesh Ganesh

A few years ago, China was the cause of considerable heartburn for the satraps of the Indian software exports industry. More so after the Chinese government vowed to get a sizeable share of the software services market. Indian IT companies felt the heat, especially as Chinese companies were known to be aggressive players that penetrated and dominated almost every industry they ventured into. A few Indian players decided to brave the dragon’s fire by looking at opportunities for co-operation. China’s IT spend to GDP ratio is nearly five times that of India. The Indian software industry’s strategy was to set up a base in China that would help them address that country’s domestic market and tap lucrative opportunities in Japan, which happens to be China’s preferred trading partner.

The domestic market

Gartner says that China will catch up with India by 2006, but Indian firms will be a part of the Chinese growth story and can eventually control 40 percent of China’s IT services exports.

Explains Girija Pandey, regional director and head of TCS’s Asia Pacific Operations, “Our strategy for China is simple. We address the domestic market, look at serving other Asian countries and the needs of global companies located in China.”

The Chinese domestic market is estimated to be four times that of India’s. Also, with China becoming a part of the WTO, local banks in China will soon be forced to upgrade their technology. With local players unable to provide the required expertise and technology, the market is currently dominated by MNCs. It is an opportunity for Indian IT firms to demonstrate their prowess.

“We are on the verge of bagging a few contracts, both in Japan and Korea,” says V Balasubramanian, head, APAC, Zensar Technologies. There’s a story in that statement. China has been a favoured nation for Japan’s software imports. The synergy is easy to understand. Japanese is the second language taught in north-eastern China, where most companies are located. Also, a majority of Chinese programmers are familiar with the ‘double byte’ system that is used in generating Chinese and Japanese characters. China also offers a location advantage to Japanese companies that wish to outsource their projects. By setting-up shop in China, Indian software companies are killing two birds with one stone.

The tiger and the dragon

Indian companies have adopted a mix-and-match strategy in China. While most players have taken the alliance or the JV route, Mphasis has gone in for acquisitions. TCS has tied-up with Zoom Electronics, an IT and telecommunications service provider and eBis, a leading financial services provider. Besides addressing the requirements of the domestic market, a foothold in China gives TCS the opportunity to service global giants such as GE that are on the lookout for technologically-competent players to service them. The company follows a policy of employing local manpower and its locations are strategic in nature. For instance, TCS set up a development centre in Hangzhou, which is home to many Chinese universities. This has helped the company tap the local talent base. Similarly, Satyam has set up a software development centre in China to serve its global clients operating there. Says Virender Aggarwal, director and senior VP, Satyam APAC, “We plan to focus on global MNC clients that have established operations in China.”

Zensar has also formed a joint venture with Broadengate Systems Inc, a major Chinese software outsourcing service provider. Zensar has a presence in major Chinese regions such as Shenzhen, Beijing, Shanghai, Dalian and Haikou.

Says Balasubramanian, “One of our biggest projects in China involves working with retail apparel giant Liz Claiborne to develop an assessment planning tool that will take care of inventory.” Zensar started working on this project in May 2004 and will undertake maintenance work after the project is completed.

Another company that is going great guns in China is Aptech. Says Pramod Khera, MD and CEO, Aptech, “A 50:50 joint venture in 2000 with Beijing University’s Beida Jadebird IT marked the start of our operations in China. Since then, we have grown to 100 centres in 57 cities having trained over 50,000 students in Mandarin.” Aptech has been expanding operations by setting-up education centres within schools.

The silken touch

TCS sees huge business opportunities coming from global companies such as GE China. Zensar expects 50 percent of its overall business to come from its Chinese operations. It hopes to garner $10 million by the end of this year, up from the present $4 million. Aptech derives revenues of $30 million from the Chinese market. With a large market opening up, it is imperative that Indian firms play their cards right and move in for the kill.

venkatesh@expresscomputeronline.com